AkzoNobel sets out supply chain challenge

AkzoNobel has set out a programme to boost profits by 500m euros (£438m) a year – 40 per cent of which will come from supply chain and sourcing.

The company which makes paints and coatings under the Dulux, Sikkens, International and Eka brands, has created 20 master plans with 100 detailed initiatives over three years.

About 40 per cent of the anticipated benefits will come from the supply chain and sourcing programmes, it said. A further 50 per cent will come from margin management, research and development initiatives, and business restructuring programmes.

“These benefits will accrue across AkzoNobel’s business areas, with more than 40 per cent of the benefits in decorative paints, more than 30 per cent in performance coatings and close to 25 per cent in specialty chemicals.

The benefits expected in 2012 amount to 200m euros (£175m), with a similar level of incidental costs in the same year. The total costs to deliver the programme are estimated to be 425m euros (£372m).

“This performance improvement programme represents a major change in the way AkzoNobel is run and managed,” said chief executive Hans Wijers.

“The establishment of the Executive Committee was an essential step in creating a platform for change at the top. The perfect storm of unprecedented raw material price inflation, in combination with the effects of the financial crisis, only adds to our sense of urgency to capture the benefits of the programme. I am confident that this programme will provide focus, structural improvements and lower costs, which will underpin the delivery of our growth ambitions and create an EBITDA level at or above the mid-range of our 13 to 15 per cent guidance.”

In its third quarter results AkzoNobel reported a 12 per cent fall in EBITDA to 507m euros (£444m) despite a five per cent rise in sales to 4bn euros.